A very warm welcome to the Q4 FY 2024 results conference call of Krsnaa Diagnostics Limited, hosted by JM Financial. Before we begin, I would like to remind all participants that today's call may contain statements that are forward looking statements, including but without limitation, statements relating to the implementation of strategic initiatives and other statements relating to Krsnaa Diagnostics' future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual development and results to differ materially from our expectations. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Jain il Shah from JM Financial. Thank you and over to you, sir.
Hi, good morning everyone and welcome to the Q4 FY24 results conference call of Krsnaa Diagnostics Limited. Joining us today on the call are Mr. Rajendra Mutha, Chairman and Whole Time Director, Mr. Yash Mutha, Joint Managing Director, Ms. Pallavi Bhatewara, Executive Director, Mr. Pawan Daga, Chief Financial Officer and Mr. Vivek Jain, Head Investor Relations. I would like to now hand over the call to Mr. Rajendra Mutha for his opening remarks. Thank you and over to you, sir.
सभी को नमस्कार, हमारे Q4 FY 24 इस कॉल में भाग लेने के लिए आप सभी को धन्यवाद। मुझे यह बताते हुए बहुत आनंद
Sir, your audio is not clear sir, one moment please. Ladies and gentlemen, please stay on the line while we reconnect.
Ladies and gentlemen, we have the management line reconnected, sir you can go ahead.
सभी को मेरा नमस्कार। हमारे Q4 2024 इस कॉल में भाग लेने के लिए आप सभी को धन्यवाद। मुझे यह बताते हुए बहुत आनंद हो रहा है कि इस क्वार्टर और फाइनेंशियल ईयर 2024 के रिजल्ट हमारी उम्मीदों के अनुसार हैं और मुझे इस बात का गर्व भी है कि तेरह सालों में कंपनी ने अपने लिए डायग्नोस्टिक क्षेत्र में और PPP क्षेत्र में एक अलग पहचान बनाई है। हमारे पास आज तक एक सौ अड़तालीस CT स्कैन और MRI केंद्र हैं। चौदह सौ से अधिक X-Ray सिस्टम टेलेरेडियोलॉजी केंद्र के लिए हमने इंस्टॉल किए हैं। इसके साथ ही सिक्सटी सेवन CT स्कैन और ट्वेंटी थ्री MRI मशीन के टेंडर कंपनी ने जीते हैं और टेंडर के अनुसार इंस्टॉलेशन करने हैं, जिससे कंपनी के पास दो सौ CT और MRI और सोलह सौ से अधिक X-Ray सिस्टम रेडियोलॉजी उपकरण इंस्टॉलेशन होंगे। मुझे विश्वास है कि एशिया में इतनी बड़ी इंस्टॉलेशन कोई और कंपनी के पास नहीं है। CT स्कैन, MRI और X-Ray टेलेरेडियोलॉजी उपकरणों के सबसे बड़े इंस्टॉलेशन के साथ आपकी कंपनी को भारत की सबसे बड़ी रेडियोलॉजी कंपनी के रूप में देखा जाता है। वास्तव में, आज हम सबके लिए यह गर्व का क्षण है। इसके अलावा पिछले एक दशक से हमने कंपनी PPP मॉडल पर डायग्नोस्टिक क्षेत्र में कार्य करते हुए, जनता की सेवा करते हुए, अन्य डायग्नोस्टिक कंपनियों से अतुलनीय और अद्वितीय बनाया है। इतना ही नहीं, अपनी कंपनी पूरे भारत में अपने बिजनेस और प्रेजेंस का विस्तार करने के लिए लगातार निवेश किया है। इससे भविष्य के विकास के लिए एक मजबूत नींव तैयार हुई है। हमें यह घोषणा करते हुए गर्व महसूस हो रहा है कि भारत में पहली बार किसी अस्पताल में कार्यरत प्रयोगशाला को CAP मान्यता प्राप्त हुई है। यह मान्यता कृष्णा की क्वालिटी सेवाओं और मरीजों को सर्वोत्तम गुणवत्ता और समय पर सेवाएं प्रदान करने की कमिटमेंट को साबित करती है। हमने हाल ही में MRI और सत्रह CT स्कैन सेवाओं के लिए काम शुरू करने के लिए एग्रीमेंट एक्जीक्यूट किया है।
सबसे बड़े टेंडर में से एक टेंडर है और हमें इसका, हमने कृष्णा रिटेल प्राइवेट लिमिटेड, 100% सब्सिडियरी कंपनी की स्थापना की है, जिसका फोकस B2B और B2C बिजनेस पर होगा। हमने B2B और B2C बिजनेस क्षेत्र में शुरू किया है और जिन राज्यों में हम मौजूद हैं और जहां हमने B2C लॉन्च किया है और B2C मॉडल को जो प्रोत्साहन मिला है, हमारी कंपनी की अपनी टीम इस बिजनेस को ऊंचाई के स्तर पर ले जाएगी। लेकिन यह एक नया बिजनेस वर्टिकल है।
तक पहुंचाने में कुछ समय लगेगा। हम B2C बिजनेस में अधिक प्रगति करने के लिए अपनी टीम को आगे बढ़ाएंगे। अब मैं अपने में अपडेट देता हूं। जैसे कि आप जानते ही हैं कि मामला उच्च न्यायालय के अधिकार क्षेत्र में है। अंतिम आदेश की प्रतीक्षा है। हम जानते हैं कि अंतिम प्रतीक्षा है। हम जानते हैं कि निर्णय के लिए काफी समय हो गया है। फिर भी मैं दोहराना चाहता हूं कि कृष्णा डायग्नोस्टिक विकास के चरण में है और हम राजस्थान के बिना भी ग्रोथ को हासिल करेंगे। अब मैं आपके कॉल की आगे की जानकारी के लिए यश मोता जी को यह सौंपता हूं।
Thank you, Mr. Rajendra. I am pleased to present the impressive performance of Krsnaa Diagnostics Limited during the fourth quarter and for the financial year FY 2024. Our FY 2024 revenue reached ₹620 crores, signifying a commendable 27% year-on-year growth, and we maintained a healthy EBITDA margin of 24%. As a relatively young company established in 2011, Krsnaa Diagnostics has experienced hyper growth driven by our strategic investment in setting up diagnostic centers predominantly under the PPP model. Considered the evolution of the PPP model in the diagnostic space, the major capital expenditure has happened in the last few years, due to which the complete potential of the investment is yet to be realized. As you can see in our presentation, the centers have matured - that is, those centers which have been operational for at least three years period have demonstrated a much higher EBITDA, whereas the centers which are operational for less than three years have moderated just breaking the margin level. The centers which are operational for 1.5 years have demonstrated negative EBITDA, which is largely due to the initial ramp-up phase, wherein as we begin a particular project, the cost of the manpower, consumption and other expenses are high in the initial period and not commensurate to the revenue that is being generated. The ramp-up of this revenue happens gradually, thus the investment provides higher returns as the projects mature. The investment that we are making today are laying the foundation for future growth and profitability. We are confident that our strategic approach will yield substantial returns as the projects mature in the years to come. Having said that, let me brief you about a recent development. We have also successfully operationalized 10 CT scans in the state of Maharashtra. Remaining 29 CT scans will be soon operationalized and the revenue from these projects are expected to materialize from the second quarter of fiscal year 2025. Over the last three months, we have successfully established two new pathology labs and established 350 pathology collection centers. Over the last twelve months, we have successfully established 50 new CT/MRI centers, 25 new pathology labs, and established around 805 pathology collection centers and 63 new tele-reporting centers. These endeavors have been meticulously aligned with our expansion strategy. As you are aware, we have Dr. Prashant as our CEO, who is looking after our public-private partnership business along with the B2C initiatives. We have also recently executed the agreement for some significant tenders, including the installation of 17 MRI and 17 CT scans across Maharashtra, 5 MRI from Madhya Pradesh, 31 CT scans from Maharashtra, as well as the pathology projects in Odisha and Assam. These projects are currently in various stages of implementation and ramp-up, adding to our existing operational portfolio. Further, with the upcoming projects, the scale and complexity of these new projects necessitated a focused approach and Dr. Prashant's responsibilities have expanded encompassing new project implementation, ongoing monitoring and organizational development, all with a sharp focus on our PPP initiatives. Currently, Dr. Prashant is also helping us in initiating the B2C vertical and the various initiatives under that, which has shown a very promising potential. To support this expansion and to ensure that we capitalize on our B2C opportunities, I am further thrilled to announce a pivotal development in our journey towards exponential growth in the B2C vertical. We are excited to welcome Mr. Mitesh Dave as the Group CEO of Krsnaa Diagnostics Limited. Mr. Mitesh brings a wealth of experience from his illustrious career in FMCG, OTC pharmaceuticals, telecom, diagnostics and single specialty hospitals. His proven track record in driving significant financial outcomes, managing large-scale budgets and overseeing P&L responsibilities aligns perfectly with our ambitious growth objectives. Mitesh brings a wealth of experience from his illustrious career. In his previous roles, he has successfully overseen healthcare business with impressive growth rates. With Mitesh at the helm, we are poised to leverage our existing infrastructure to accelerate our penetration into the B2C market. His strategic vision and operational experience...
Excellence will be instrumental in navigating the complexities of our global business operations and unlocking new synergies across various segments. This strategic hire underscores our commitment to strengthening our leadership team with top-tier talent, capable of driving innovation, operational efficiency, and sustainable growth. We are confident that under Mitesh's leadership, Krsnaa Diagnostics will continue to set new benchmarks in the diagnostic industry, delivering exceptional value to our stakeholders and enhancing our market position. His expertise will also complement Dr. Prashant's efforts, allowing us to maintain a robust focus on our PPP business, while simultaneously driving growth in our B2C vertical. This dual approach ensures that we can deliver on our current commitments, and at the same time, explore new avenues for expansion without compromising on either front. This collaboration will also enable us to leverage our existing infrastructure efficiently, minimizing redundancy and optimizing resource utilization.
Further, as we welcome Mitesh Dave, we are also conscious that we might have to build a team to support the B2C foray. However, we are committed to maintaining financial discipline. We are confident that with this enhanced leadership structure, we will continue to achieve impressive growth and financial outcomes. Furthermore, we have recently secured a significant agreement with the Maharashtra government for the installation and operation of seventeen MRI and seventeen CT scan machines. This almost INR 12+ crore project underscores our leadership in the diagnostics field. These equipments will be installed in a phased manner over the next couple years. This ambitious initiative not only strengthens our strategic partnership with the government, but also solidifies our position as a pioneer in advancing diagnostic infrastructure in India.
To brand building by prioritizing convenience and digital investments, enhancing our test menus with cutting-edge technologies to deliver precise and timely results. These strategic initiatives are designed to expand our network and ensure unparalleled customer service for our consumers. With a robust pan-India presence, Krsnaa Diagnostics is uniquely positioned to capitalize on the burgeoning growth trends in the Indian industry and the healthcare industry. Our consistent revenue growth is a testament to a successful expansion across all regions, whether it is north, east, west, and south. As part of our relentless pursuit of excellence, we are continuously exploring new testing capabilities to meet the dynamic needs of our patients and customers. We are aggressively integrating state-of-the-art technologies and analytical tools across the critical departments, such as pathology, radiology, supply chain, ensuring we deliver diagnostics.
Our extensive presence across Tier Two and Tier Three cities, facilitated by successful public-private partnership models, positions us at the forefront of leveraging opportunities in these rapidly growing regions. While many of our peers are just beginning to focus on these markets, Krsnaa Diagnostics has already established a strong foothold, providing us with a significant competitive advantage. This strategic positioning allows us to meet the healthcare needs of underserved areas, driving both social impact and business growth. The Indian diagnostic industry continues to show promising growth, and Krsnaa Diagnostics stands at the forefront of this transformation. We are on the cusp of limitless possibilities, and we are determined to adapt, innovate, and excel. Plans are designed to unlock new opportunities and drive expansion, ensuring we continue to positively impact lives and contribute to the advancements of the healthcare industry.
Now, to brief you in details about our financial numbers, I would like to hand over the call to Mr. Pawan Daga.
Thank you, Yash. Good morning, everyone. Present the financial highlights for the quarter ending in 2024. In the fourth quarter of FY 2024, our total revenue from operations experienced a notable upsurge, reaching INR 166 crore, making an impressive 25% year-on-year growth. Shifting our focus to operational performance, our Q4 FY 2024 EBITDA reached INR 45 crores, signifying a commendable 28% year-on-year growth, and we maintained a healthy margin of 27%. Additionally, our net profit amounting to INR 19 crores, with a corresponding margin of 11%. The margin has improved due to better operational efficiency and center maturity. In FY 2024, our total revenue from operation reached INR 620 crores, making an impressive 28% year-on-year growth.
Our FY 2024 EBITDA reached INR 147 crore, signifying a commendable 18% year-on-year growth, and we maintained a healthy margin of 24%. Additionally, our net profit amounting to INR 57 crore, with a corresponding margin of 9%. During this quarter, our receivables stand out to be 68 days, excluding receivable from Himachal Pradesh. We experienced a significant increase in receivable from HP, leading to higher working capital costs. The ramp-up of project in Odisha and Assam, along with the outlay in Maharashtra city scans project has further impacted our EBITDA to cash flow conversion. The delay in receivable, mainly due to the election-related activities, is a temporary challenge, similar to what we faced during the FY 2019 election, wherein our receivable days were comparable to around 98 days.
Despite these temporary setbacks, which are typical for our business, Krsnaa Diagnostics is laying a strong foundation for future growth. Our current investment in the project and infrastructure are crucial steps towards our long-term vision. We would like to further update you that we have started receiving the payment from this quarter onwards. This quarter, our depreciation expenses are slightly lower. This adjustment results from a necessary review and revision of our accounting estimates, specifically the useful life and the residual value of our assets, considering that it had been some time since we last undertook such a comprehensive review. This revision was essential to align our accounting practices with the current condition and the uses of our assets.
This prudent adjustment ensures our financial statements more accurately reflect the true and fair view and the lifespan of our assets, providing a clear picture of our company's financial health and sustainability. Also, the board has recommended a final dividend of INR 2.50 per share, which is 50% payout. Thank you. We can now open the floor for questions and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Balam urali Krishna from Oman Investment Advisors. Please go ahead.
Hi, good morning, Yash. I have two quick queries. First of all, on one bookkeeping question regarding this fees paid to hospital, it was decreased drastically and clear cut from 18% to 9%. Could you please explain?
The fees to hospital comprises revenue sharing arrangement that we have with our B2C partners. Depending on the outcome of the performance obligations that these partners have to deliver, accordingly, these revenue sharing are evaluated, and therefore you see a reduction in this particular quarter.
Going forward, how will it be? Will it be maintained at the same level, or can we expect any upside?
No. So as the business ramps up, it might be slightly higher than in this quarter, but it won't be significantly deviating from if you look at it on an annualized level.
Okay, sure. And regarding this Rajasthan tender, any update on that?
So like our chairman mentioned in his speech, we are equally waiting for the outcome of the High Court matter. And as and when it comes, we'll certainly update everyone. The hearing is expected to be there in the next couple of days, so we are equally watching the space, and we'll keep you posted.
Regarding the pipeline tenders, I think we have applied. We were talking about the tender in Andhra Pradesh since one or two quarters. Is there any outcome and any significant tenders we have quoted for which we are waiting for the results?
No. As of now, there are a couple of tenders which are upcoming as well. However, having said that, until the election gets over, all these tenders will be on hold. Hopefully after the election gets over, we'll be able to give a more clearer picture.
Is it possible to name a few tenders which we have already participated and are waiting for the results?
No, I won't be able to comment on that as of now.
So one more thing on the execution side. I see that only we have done, out of the 38 CT scan machines, we have done only seven. We have added only one machine this quarter, and as well as in Maharashtra also. So how can we come in the upcoming quarter, how this will be sped up? And any issue in the UP, because it's almost, I think, two years old tender in 2022, we have won that tender for the eight scanning machine. So we have not yet completed that entire tender, deployed equipment. Is there any issue with that one? And in the upcoming quarters, how will be this execution pace, how will it appear?
So typically in our business, after the tender gets awarded, we have to receive the site from the respective authorities, then the equipments have to be procured and installed. So many places where there are delays, these are largely on account of such matters, where either the site has not been handed over or there could be issues such as electricity not there on site. These are typical procedural delays. But from a compliance perspective, we are all geared up to deploy these equipments at the respective centers, and during this financial year also, there are various of these equipments which are in the pipeline, along with the timelines.
From a procedural perspective also, we have now improved wherein today, we were earlier used to wait for certain of these updates, but now the team is poised to get all the updates upfront and then decide on the planning. So I believe in this financial year as well, FY 2024-25, there will be significant additions to our centers.
That's great. Lastly, on Maharashtra, we have already won the 39 CT scan tender in the previous years. Now we have won seventeen MRI and CT scan again. I think we would have captured the entire state. Are there any further scope in this Maharashtra?
Yeah. So if you see predominantly with the 17 MRI, 17 CT, and the existing 39 CT scan, you would have covered majority of the entire Maharashtra. Having said that, you know, there are few municipalities and some other public hospitals which are still open. But I think now we have a lion share in the Maharashtra region as such.
Broadly, last question, but-
Maybe the question-
One last question, I will exit. One last question. So we have almost covered a few states, almost 50% of the states in India with the tenders for this public-private partnership. So going forward, is there any further scope from any states which you have untouched or whether they don't have any public-private partnership on it? So do you see any scope in the further few more states which can we can go for that partnership again?
Yes. If you see, we are present in states only like Punjab and Himachal Pradesh, where we have full services, but rest of all the other states are still open. And again, in the rest of the states we are present, we are present only in select districts or select verticals. You know, where, for example, in some places we are in pathology, in some places we are in radiology. There is still an immense potential, in our opinion, and there is a significant opportunity that Krsnaa can tap into the future in terms of PPP opportunity. I believe there's a strong opportunity base for us, even in the subsequent months or years to come.
That's all. Thanks a lot for listening.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Anshul Agrawal from Emkay. Please go ahead.
Hi, good afternoon, everyone. Thank you for the opportunity. Many congratulations on the-
May I request that you use your handset, please? Your audio is slightly muffled.
Sure. Is this any better?
Yes, sir. Please go ahead.
Great. Thank you for the opportunity, and congratulations on the CAP accreditation, gentlemen. We have two questions. One on our gross margins. I am unable to understand why our gross margins have been declining over the past four, five quarters. Is this because of our convergence to a pay-per-use model or any one-offs in this? I can't seem to point a finger on that. Could you help me understand what is the reason our medical consumables are increasing as a percentage of sales?
This is mainly because of the increase in the share of the pathology business and also the projects of pathology which we have deployed, which are at very initial stage, where we see calibration QCs are higher at the initial period, where we cannot capitalize this cost. That's why we see a slightly higher consumption cost during this financial year.
We expect this to stabilize at where exactly? Gross margins would be stable according to by when and at what levels?
By Q1 or Q2, you see this, like a gross margin or the consumption level will be stabilized.
Okay, and any approximate levels or broad range on that?
This will be 78% kind of a gross margin you can see by after stabilizing our gross margin.
Okay. And would our convergence to the pay-per-use model, which if I remember, you had mentioned in the Q3 call, would that also lead to lower gross margins in the future?
So on the pay-per-use model, this model will not impact your gross margin, but they will impact the EBITDA margin. We started the pay-per-use model with some of our partners.
Mm-hmm.
You know, which will eventually help having a better ROCE going forward.
Got it. Very clear. Thank you. Second question was on the B2C business. While I understand we are investing a lot in terms of managerial bandwidth, et cetera, what I wanted to understand is, I believe our aim is not to have any differential pricing for B2C services. Would that be correct, or is there any change that would be there? Would we have differential prices for our B2C model?
From a B2C pricing perspective, of course, the pricing will have to be differential, considering the fact that this will be a differentiated service, though it leverages our existing infrastructure.
Mm-hmm.
But considering, you know, for example, home collection services, as well as other, it will be differentiated, but it will still be competitive compared to whatever the market is.
Thank you.
Mm-hmm.
Sorry to interrupt you, Mr. Anshul. May we request that you return to the question queue, please?
Sure. Thank you so much.
The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Yeah. Hi, good morning to the team. A few data points are required.
Sir?
Yeah.
May we request that you use your handset, sir? Your audio is slightly muffled, sir.
Is this better?
No, sir. Still muffled, sir.
Just one minute, okay. Yeah, is this better now?
Yes, sir. You can go ahead.
Great. Just three data points from my end. One is if you can share the revenue from tele-reporting centers in the radiology segment, either annually or quarterly or growth rate, whatever is convenient.
Our tele-reporting revenue for the year and the quarter also, it's 9% of overall revenue.
Okay. And number of tests in pathology labs for the year?
This data point is not immediately ready. You can reach out to our investor relations, Vivek Jain. They will provide you all the information.
Sure, sure. Well, that's it from my side. Thank you so much.
Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Mr. Deepak, may we request that you unmute your line from your side, please? As there is no response, I would request that we move to the next question. The next question is from the line of Rakesh Parekh from Rockstud Capital LLP. Please go ahead.
Thanks for the opportunity. I was referring to your slide on maturity profile, where you suggested that net blocks have been moving, how the old blocks we are getting set up as an ROC. I just want to understand what maturity level or what period gives you keynote, or how much time does it take to move to a mature block?
So typically, if you see PPP projects, you know, take around one to two years to stabilize, and from there on then they start moving to the mature level of centers. So by year three, you know, we have centers which would have matured. This again slightly varies from project to project, but on a broad-based level, this is how we see the performance improving over the coming years, and the past trends that we've witnessed.
Okay. So it will be right to assume that Punjab and Chandigarh are where we had a major investment at the time of IPO, and now they will be completing three years and will be going in a mature block down the line?
Punjab has already seen good growth rates coming from the last couple of quarters, and we expect that the growth momentum to continue. Now, they'll be moving towards the mature centers. One good advantage with Punjab is also it's a pure cash kind of a PPP model, where we collect cash directly from the customers.
Okay. The second thing is, from the next year's point of view, can you just throw more highlight on how much incremental growth will be coming from the radiology or pathology side for the next years in terms of deployment?
Yeah. So in terms of deployment, considering that our Assam, Odisha projects are almost deployed, barring a few sites and few locations, next year will be more on the radiology side, given the recent tender wins of CT scans and MRI. So in this fiscal year, we expect more of implementation to be done on the radiology side.
The next question, just in addition to it, we have seen that our depreciation has increased substantially, which is adding to our fact, while we have a top line growth, the bottom growth has not been increasing. Do we assume that it will be the same going forward in the coming year, by 2010?
Typically, if you see the revenue growth, as I said earlier, with the initial implementation phases, then the revenue growth happens in a pretty significant manner. That is what we're experiencing, that after the initial first two years of the project implementation, you see the significant growth rate, and especially with radiology, where we normally have witnessed in the past as well, the growth rates are much better, and that is what we expect in the subsequent quarters to come.
Okay. That's it from my side. Thank you.
Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Hello, am I audible, sir?
Yes, sir. Please go ahead, sir.
Okay. Sure. Thank you so much. So just wanted to understand your, just the last point that you mentioned about the growth rate to be better in subsequent quarters. So if I have to look at next two years' CAGR, so what sort of CAGR we might be looking at? I mean, 25%, 30% would be the rough range that we might be looking in terms of top line growth?
Yeah, that is the rough range we're looking at, around 25% to 30% in the coming years.
25% to 30%. And you mentioned your gross margin is likely to stabilize at about 78%, which is currently 74%. So do you expect your EBITDA margin also to inch up from current 25% EBITDA margin?
No, I think the EBITDA margins will stabilize at 25%. The reason being is, as I said, pathology contribution is also increasing in the overall business, and at the same time, there are incremental projects getting deployed, so those costs also come in. So now we've looked at from a model perspective, and we believe 25% is a stable EBITDA margin.
Fair, fair enough. And couple of clarifications. Depreciation at INR 18 crores is what because of your accounting policy changes is likely to be the rate going forward per quarter?
Yes.
Okay, okay. And interest cost, you mentioned this, first quarter will remain higher and then it will normalize for the entire year, right, for FY 2025?
Yes. We see our working capital currently is stretched, so that's why the finance cost is higher in Q1. So it will be getting stabilized by end of Q1. So we see the further reduction in the finance cost.
Understood. Just one last thing, why are fees to hospital so much lower? I mean, generally, we are in the range of INR 15 to 20 crores per quarter, but this quarter is only INR 9 crores, so what is the reason for that?
Yes. As I mentioned earlier, the fees to hospital, it's basically revenue sharing that we have with our partners, with the business coordinators, as we call them. This is linked to certain performance obligations that they have to deliver, and since those are not met, therefore, we had revision to these revenue sharing. Now, they are linked to certain milestones as well as achievement of revenue in some cases, as well as certain collection, like in the case of HP. Therefore, you see a dip in this quarter.
Okay. I got it. I understand. That's very helpful, sir. I think all the very best to you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Amruta Deharkar Sane from Wealth Managers India Private Limited. Please go ahead.
Thank you for the opportunity. So on the balance sheet of March 2024, we see that the company reported net debt of around INR 53 crores. So what is the kind of potential debt level by March 2025?
So we will try to maintain the existing debt levels. As we said, you know, whatever debt was largely because of the enhanced receivables, which subsequently should go down. But also, you know, considering the expansion, we believe the debt levels will be more or less at the same levels and may not increase.
Okay. Thank you. My second question regarding receivables, you said, excluding HP, around 68 days. So have you started receiving money from the HP centers?
Yes, yes. We've already started receiving money from HP centers in the month of April and May.
How long do you expect when this whole HP effect to smooth out?
I believe it will take till the end of Q2, because the elections will get over in June, and from there on, then the process will initiate again. So we believe between June, July, August, we should be able to recover our receivables.
Mm-hmm. All right. Thank you.
Thank you. The next question is from the line of Ankeet Pandya from InCred Asset Management. Please go ahead.
Hi. Thanks for the opportunity. Am I audible?
Yes, sir, you're audible, sir. Please-
Thank you so much. Hi, Yash, sir, and hi, Pawan, sir. So on the trade receivables, the INR 100 crore increase we have seen year-over-year, is that majority or most of it coming from Himachal Pradesh, or is it some other states also where we have seen increase in receivables?
Predominantly it is for Himachal Pradesh. As I said, and like Pawan also alluded earlier in his speech, this is largely receivables from Himachal Pradesh. There have been other receivables, but they are in the regular course of business, and we don't see any stretched receivable there. Our net receivables, excluding Himachal Pradesh, is about 68 days, which is in line with our business.
Understood. The HP receivables that you said, in response to the prior question, it is already starting to flow in, right? The money is already starting to flow.
Yes, yes.
And there is a line item on the balance sheet, other financial assets, which has gone up from INR 9 crores in the previous year to about INR 143 crores. What would this include?
This is basically, if you see comparable years where the other financial assets, noncurrent, which is basically a shift of fixed deposits, long term and short term, nothing apart from that.
These are FD, basically. All right. All right. So when we compute your net debt, we should take into account the other financial assets, both noncurrent and current, right?
Yes.
Understood. Just one last question on the margin expectation, Yash, as you said, 25%, despite improvement in gross margin, which we expect from 74% to 78%, you know, maybe over one, two years, depending on how long it takes. So what element of your business will take up this 4%, which your gross margin will generate? Which line item do you see taking up this 4% to keep your margins at 25%?
So we've demonstrated, or you've seen in the past as well, with project implementation, there are initial employee costs which take a hit as the project gets established or we are implementing those. Like, for example, with seventeen cities, again, there will be manpower that will come. After seeing all those variables, we thought the 25% is a good stable level of EBITDA of any incremental cost that comes along because of the manpower or the consumption cost or logistics, other initial setup costs which cannot be capitalized.
And to the same point, this fees to hospitals, is it within the government business that we pay profit share to hospitals, or is it outside that?
No, no, this is outside. These are all private agreements that we have with business coordinators.
Understood. Thanks a lot, gentlemen, and all the best.
Thank you.
Thank you.
The next question is from the line of Vandit Dharamshi from Alpha Invesco. Please go ahead.
Thank you for the opportunity, sir, and congratulations on good growth numbers, sir. Now, I have two, three questions, sir. First question is, sir, I think on the last call we spoke about we will not be looking for debt per se, but I think on this call you spoke that even after we get the Himachal Pradesh receivables-
We will continue to maintain the debt at these levels. So any reason, sir, why we have changed our stance on debt?
No, no, no. This debt that I was referring was more towards the working capital debt that might come up because of the enhanced or the incremental CapEx that we also have to invest. For example, when we buy these equipments, there's a certain element of down payment that we have to do, so that will also add up. Hence, we believe that our effort will be to reduce the debt level, and we at a management level wish to continue to be a debt-free company. But considering the dynamics of the receivable management, increasing business and the working capital that is required, we believe these will be the debt levels in the future as well.
Of course, our efforts will be to reduce these levels, but based on the past experience, we believe we will not try to go beyond these levels, but maybe maintain at these levels or lower than that.
Okay. So all of this debt will be all short-term debt, is what you're referring to?
Yes. Yes, yes.
Okay. And so you've mentioned that for Himachal Pradesh, a large part of the receivable should start flowing in from, say, June, July, August, due to elections. So would the receivable numbers actually come down in Q2 because of elections right now?
Yes, yes. Which is what we've... You know, there are, you know, many of these officers are not at the respective locations. So once the elections get over and they come back to their locations and the procedures start getting implemented in terms of the checks and balances, we believe the money should start flowing in post the elections, which might happen between Q1 end and Q2.
Got it. Got it, sir. And the last question from my end, what will be our, say, for purposes of vision five years down the line, say, for Krsnaa in the year FY 2029 or FY 2030, where do we envision ourselves, sir?
Since the last couple of years, we've tried to maintain our serious growth rate. Considering the current projects in hand, as well as some upcoming opportunities that we see, and with the B2C vertical, we believe that we will try to maintain the same level of growth and be a leader both not only in the PPP, but as well as in the B2C space, and continue to be a leadership in the radiology segment as we are today.
Are you referring to a 25% growth over the next five years? Because that will take us to close to ₹53,000 crores.
Yeah, that is what we are also working aggressively towards.
Okay. Okay, sir. Thank you so much. I'll come back in the queue.
Thank you.
Thank you.
The next question is from the line of Vishal Manchanda from Systematix. Please go ahead.
Hi, thanks for the opportunity. What is your expected radiology to pathology mix over the next two years?
Which will be in the range of 60/40, as the radiology projects are also under implementation as of now, which will be deployed, and we'll see then an incremental contribution from radiology. Radiology growth, as well as considering the pathology, we will see next year will be in the range of 60% to 40%.
We should expect a similar number in FY 2026, too?
Yes.
Okay. And on CapEx, is it like we're spending INR 150 crores excluding Rajasthan next year, right? FY 2025 and FY 2026?
Yes.
Yes.
Okay. And including Rajasthan, what would be the CapEx?
So if Rajasthan comes along, you know, again, it will be in the range of around INR 250 crores, which we'll of course see as the time comes.
It'll add about fifty crores, right, to the number?
Vishal, this is too early to comment on the Rajasthan part with the CapEx. Once the projects come in, we will reevaluate and, as the quarters, next quarter, we will give you update about the Rajasthan CapEx and other parameters once we have a clear understanding on the project.
Okay. Thank you. That's all from my end.
Thank you. The next question is from the line of Mayur Parkeria from Wealth Management. Please go ahead. Yes, Mr. Mayur, your line is open.
Hello?
Has been unmuted. Please go ahead.
Hello, am I audible?
Yes, sir.
Thank you for taking my questions, and good morning to the management. Actually, just wanted to understand, while Rajasthan tender or the situation continues to prolong, in the meantime, we are getting orders already. Now the Maharashtra order has come. It's a decent size order with INR 150 crore outlay. If the delay continues and if we get, as you are saying, alluding, that there were a couple of other opportunities in the play, will it not create a financial strain if the Rajasthan order comes a little delayed, but it comes?
Then we'll not be able to even come out of it and already a couple would have been in the hand, and will it create a risk of executing on the size of the orders as if delays continue, and then we get after six months, and in the meantime, we get a couple of one or two large orders. How will we handle that kind of a risk?
So, yeah. If you see over the last couple of years, Krsnaa has deployed projects statewide, whether it is Punjab, Himachal, or Maharashtra. And like we mentioned earlier as well, the reason we are also increasing the bandwidth of the leadership team, we are cognizant of the fact that tomorrow we might have pathology projects of Rajasthan as well as Maharashtra coming up. So overall and direction-wise, I don't think we see that as a challenge. In fact, Krsnaa is capable today to deliver in terms of deploying these PPP projects and taking the company to the next level.
Again, from a financial standpoint as well, like we've discussed, we have initiated some of the pay-per- use model with some of our partners, and that will also help us to expand without significantly taking any debt. Again, you know, depending on the side, now, as I said tomorrow, if Rajasthan comes and, based on what is the capital outlay, we'll take those decisions. But from all perspective, whether it is financial or the bandwidth, as well as from a team's perspective, we don't see any challenge in implementing this project as and when they come.
Okay. So that's, you know, sorry to say, but it's a slightly overconfident kind of situation which we found here, because financially we are already seeing a lot of stress on the margins, which is there. We, while, you know, operating in a project, in a PPP with a government kind of project, you know, receivables can always get stuck here and there. It may be six months or eight months situation, but, you know, those risks are inherent in the business. And if such situation comes, then, you know, there can be some risk of, you know, financial situation which may go out of hand for us.
My only request to the management was to, while we have very aggressive growth targets in our minds, this is absolutely with the healthcare opportunity that is there for twenty years in India. It is not the next three years. While I understand the scale of opportunities may be very large in the next three, four, five years as governments understand that we need quality healthcare. But to keep that pace of expansion also in mind when we look at this, because there are many operational risks on the PPP side.
I'm sure you all understand that better, but just from the as we participate as a minority investors and shareholders, we would request the management to take into consideration any potential risk, because these are dealing with the governments and things can happen. So that was just a small observation and risk, which I just thought that to take care of it. Secondly, if you can highlight some qualitative aspects around the B2C side, which we are doing. I understand it's a small segment, we are starting to expand on that side.
But if you can give us some qualitative understanding of what is happening on the business side, and which are the states where we are putting this, we have the opportunity. And how are we going about this over the next twelve months, and what are our milestones there?
Sure. First of all, I appreciate and thank you for sharing your concerns. We certainly take note of the concerns that you've highlighted. And as I said, both from at management level, we are cognizant and, given our past experience, we're working towards how to ensure that the risk from these, any PPP projects, does not impact the business. Now, coming to the B2C business, like we've mentioned, we are exploring B2C setup in the existing projects that we have, whether it is Maharashtra, Punjab, Assam, Odisha, where we have the lab infrastructures. In fact, in places like Assam, Odisha, we have labs which are in the, not in the government premises, but in the places which are taken on rent.
These are some of the states that we would be going ahead with the B2C initiatives. At the same time, we are also expanding our test menu, the quality accreditation, like you saw, the CAP accreditation that we've achieved. All these are done in a way where eventually it will converge that the B2C setups as well as the infrastructure could be leveraged. Hence, we could pour into the B2C and create value for both our customers as well as for our stakeholders.
Okay. I appreciate. Just one small clarification. There is also an understanding that you-
May we request that you return to the question queue for follow-up questions, please? Thank you.
Okay. Thank you.
The next question is from the line of Piyush Jain, who is an investor. Please go ahead.
Thank you. Hello? Hello. Yeah, thanks for operating. I have two questions. First, I want to just understand a brief area where our B2C business is going on. What is the current revenue mix, and what we see in the next two to three years, the B2C business will have a size of the business? And second, will this have a same similar type of margin around 25%, 26% type of business something? And second, this fees to doctor, which has reduced from around 17% from last year to 12% something. This is a one-year phenomena, or should we build up that this number will remain around 13% to 17% only for the future year?
I think there were a couple of questions. I'll take it one by one. If you see the B2C revenues that we have just started off with, in terms of the various initiatives we've taken, as well as the infrastructure leveraging, we expect the B2C to be around 2% to 3% in the initial years. And of course, as the business ramps up, we'll be probably able to give much better updates. With Mitesh joining, Dr. Prashant being there, I think all considered efforts, we should see a good growth in the B2C in the years to come. Your second question was with regards to the fees to hospitals.
The fees to hospitals, you know, basically, though it comes under the accounting convention of fees to hospitals, but these are, as I said, revenue sharing arrangement with some of our business partners. And they are basically an outcome of certain performance obligations that they have to deliver. I think going forward, you know, it will be in the range of 12% to 13% as a overall percentage of revenue. I hope I answered your questions.
Yeah, just one follow-up on this. In a previous call also, what we understood from you that the B2C business will have a higher pathology business. So maybe that margin side, it will be on the lesser, lower side as compared to right now we are making, because right now the radiology mix is higher. So can you just give some color on this, the B2C margin, and how much would be the pathology or radiology contribution, distribution?
Yeah. So the B2C will of course have a slightly higher share of pathology, given that is where we are trying to foray. Considering, as I mentioned, the pricing point will be slightly differentiated from our existing government pricing. So we expect the margins to be slightly better than our existing government business that we do. Hence, therefore, the impact on margins should not be significant. Having said that, you know, in the initial period, there will be certain incremental costs, including cost of leadership, certain of the other activities that we'll have to do. But from a long-term perspective, this is the model that we are trying to build upon. We will have margins which are comparable to our existing PPP business executive.
Any store-specific number or something we have in mind or something, CapEx number, or this will be a same center from where we are doing right now, our B2B business, or this will be a new center where the new and fresh CapEx will be required?
No, so we won't be deploying assets for setting up centers. We will be leveraging the existing lab infrastructure that we have. But of course, you know, I mean, the collection center, there's not a significant cost that is required there. It's a slightly asset-light model. I think, you know, we'll be having more better updates in the subsequent quarters once, you know, we have Mitesh also coming in, and then we can put some more numbers to it.
Okay, fine. Thank you.
Thank you. The next question is from the line of Rakesh Parekh from Rockstud Capital LLP. Please go ahead.
Yeah, thanks for the follow-on question. Sir, you had mentioned that we started a few facilities on pay-per-use. As a percentage, can you just quantify how much facilities you started on the pay-per-use?
No, we've just entered into some agreements on this with some of our business partners. So, you know, as of now, these are at very initial stages, but hopefully by Q2, we'll be able to give more meaningful numbers how this is shaping up.
Hello?
Mr. Rakesh, does that answer your question? Mr. Rakesh, may I request you to unmute your line from your side?
Hello, can you hear me now?
Yes, sir.
Yeah. Sir, second is on our retail strategy. We appointed our new CEO with the focus over there. So are we looking to aggressively expand over there, or make any increase in marketing budget or to focus over there?
Yes. We've been, last couple of quarters, we've been gradually studying the markets. We've seen good response, like also when our chairman mentioned about it, wherein some of the initial responses were very good for our B2C initiatives. And therefore, we now decided to go ahead on the B2C foray. We will try to keep the cost as low as possible, but there will be certain incremental costs. But as I said, at an overall company level, we'll try to ensure that our EBITDA numbers and the revenue numbers are intact.
Okay. Thank you. That's it from us.
Thank you.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for the day. I now hand the conference to Mr. Yash from the management for closing comments.
Thank you, everyone, for participating in our earnings call. If there are any unanswered questions, please feel free to reach out to our Head of Investor Relations, Mr. Vivek Jain. Thank you, and wishing a good day ahead. Thank you.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.